For many BC homeowners, property tax deferment has been a helpful way to manage cash flow without touching their mortgage or savings. Starting in 2026, the rules change in a way that’s easy to miss but important to understand.
The biggest shift isn’t just the interest rate. It’s how the interest is calculated.
How property tax deferment worked before
For taxes deferred up to and including 2025, interest was calculated using simple interest. That meant interest was charged only on the original amount of tax deferred, not on interest that had already accumulated.
The rate itself was tied to prime. For seniors in the regular program, it was prime minus 2%. For families with children, it was prime. Because the interest did not compound, balances grew slowly and predictably. For many homeowners, this made deferment feel like a low stress, low cost option.
How it works going forward
Beginning with 2026 tax years, the interest structure changes. The rate becomes prime plus 2%, and interest will compound monthly. Each month, interest is added to the balance and then begins earning interest itself.
At today’s prime rate of 4.45%, that puts the deferment rate at 6.45% compounded monthly. Over time, that compounding has a much bigger impact than many people expect.
A simple example using real numbers
Let’s assume a homeowner defers $10,000 in property taxes each year for five years, for a total of $50,000 deferred, with no payments made during that time.
Under the old rules
- Interest rate: 2.45% simple
- Total interest after five years: about $3,700
- Total balance owing: about $53,700
Under the new rules
- Interest rate: 6.45% compounded monthly
- Total interest after five years: about $11,000
- Total balance owing: about $61,000
That’s roughly $7,300 more in interest over the same five year period.
Why this change matters
Property tax deferment is still available, but it no longer behaves like the gentle cash flow tool it once was. With compounding interest, balances grow faster the longer deferment continues.
This is especially important for homeowners who plan to defer for many years, use deferment as part of estate planning, or assume the balance will remain relatively modest over time.
The bottom line
This change doesn’t mean deferment is bad. It means the strategy needs to be reviewed more carefully.
For some homeowners, deferment will still make sense. For others, it may be worth comparing it to options like refinancing, using a line of credit, or making partial payments to reduce the compounding effect.
If you’re currently deferring or thinking about it for future years, it’s worth running the numbers based on your own situation rather than assuming it works the way it used to. I can help.